Principles of Accounting Exam #1

A system of accounting in which revenues and expenses are recorded as they are earned and incurred, is called

Accrual-basis accounting

Which of the following reports provides the information necessary to prepare the financial statements?

Adjusted trial balance

Under the revenue recognition principle, revenues are generally recognized

when the earning process is substantially complete regardless if cash has been received

T or F? In the general journal for a manual system, the debit entry is always listed first

True

T or F? Managerial accounting differentiates itself from financial accounting in that the primary users of managerial accounting are parties internal to an organization

True

Garcia Company has received payment in advance (from its customer) for services Garcia has yet to perform. The receipt of this advanced payment is an example of of a(n)

Unearned revenue

Which of the following questions is NOT one of the three questions used in analyzing transactions in the first step of the Accounting Cycle?

What account should go on the balance sheet?

Generally Accepted Accounting Principles (GAAP) are

accounting standards that apply primarily to the process of financial accounting

Making a payment on an amount owed to a vendor:

decreases assets and decreases liabilities

Which of the following is a form of business organization that exists as a separate legal entity? a. A sole proprietorship b. A labor union c. A corporation d. A partnership

A corporation

Expense and revenue accounts can be considered to be subcategories of:

An owner's equity account

Which of the following is the correct sequence of the accounting cycle?

Analyze, record, adjust, report, close

Which of the following types of accounts are NOT closed out to retained earnings during the closing process?

Asset accounts

The accounting equation states:

Assets = Liabilities + Stockholders' Equity

Asset accounts are increased:

By debits

After all transactions have been journalized and posted to the accounts, a trial balance will be prepared. The purpose of this is to:

Check that total debits equal total credits

Which one of the following is an internal user of financial information? a. creditors b. internal revenue service c. customer d. company management

Company management

An entry to the right side of an account is always called a(n):

Credit

What is the mnemonic used to remember what accounts have normal debit balances and what accounts have normal credit balances?

DEAD COIL

T or F? For a given journal entry, the total debt and total credit amounts DO NOT need to be equal

False

Which of the following is NOT one of the four primary financial statements

IRS form 1040

After adjusting entries are complete, which financial statement is prepared first?

Income statement

What does IFRS stand for?

International Financial Reporting Standards

A book of original entry is called a:

Journal

A chronological listing of all economic transactions is maintained in a company's:

Journals

UNEARNED revenue is considered what type of an account?

Liability

Adjusting entries are

Made at the end of an accounting period when financial statements are prepared

Closing entries are

Required to bring all temporary accounts to a zero balance prior to starting a new accounting cycle

The basic accounting equation:

Should always balance

T or F? Generally Accepted Accounting Principles apply to the general-purpose financial statements prepared primarily for use by external parties of an organization

True

an income statement:

reports are firm's profit or loss for a period of time